Coffee market supports important level of 110 cents on ICE in NY



Amid the ups and down and all the stress caused by the new coronavirus, the May/20 position sustains part of the recovery and ends up sustaining the important level of 110 cents on ICE Futures US. It is true that the contract does not show strength to advance far beyond that level, but on the other hand it has maintained a good distance from the important psychological level of 100 cents, which is already quite positive. In general, the market raises the level of performance on ICE in NY again.

The pessimism caused by Covid-19 is expected to serve as a limiter to earnings on ICE in NY. Companies are beginning to quantify the impact of the virus on their business, which tends to have a negative effect on markets. The new stage of the epidemic, which spreads more strongly outside of China, will likely keep worrying traders. The commodities market ends up reflecting all this movement. The CRB index has accumulated losses close to 10% since the beginning of the year. Of course, this ends up interfering with the progress of the coffee market on the US exchange.

The improvement on ICE softens the negative curve, but it has not yet been enough to change the behavior of the ICO’s composite price. The current price is at 104.89 cents, down from the average of 106.89 cents in January, down 1.9%. In comparison with the same period last year, it maintains a gain of 4.2% (100.67). However, it is still well below the 5-year average for the period, which is around 121.08 cents.

The fundamental environment of coffee remains relatively quiet. The climate remains favorable to coffee crops in Brazil, which supports the promise of a record crop in Brazil in 2020. The news on conillon remains very positive, in both Rondônia and Espírito Santo, which must help consolidate the new level of Brazilian production. It is good to remember that in March, by the end of the month, it is normal that some early lots of conillon start to appear on the market.

External demand is on the defensive, given the uncertainty surrounding global markets. The strong flow of shipments from Brazil over the past few months guarantees a good supply of Brazilian origin. The trend is that buyers will stretch their stocks in Brazil, while waiting for the arrival of the Brazil’s 2020 crop. The head of demand is already turned to the new Brazilian crop, and good cup with screen 14/16 is indicated at -19 cents at the port of Santos (shipment in Jul/Dec), much cheaper than in the physicals (-13) and closer to the market’s average trading level (-19).